SDN and NFV - Opportunity for SPs to Tap (ET Telecom Blog Series)
Sanjay Kaul, Managing Director, Service Provider Business, Cisco India & SAARC
The article was published in ET Telecom
Telecommunications as an industry has undergone a shift from a voice-centric to a data-centric model. At the time when voice contributed to a large chunk of the service provider business, operators created innovative, managed capacity, consumption-based business models, which led to decent EBITDA levels for service providers despite of low APRU levels.
However with the transition towards data, those business models require a relook. In the last couple of years collectively communications service providers have put in over $20 billion in capex but none of them has yet generated any profits or have a clear line of sight to profits. This means that operators need to transform their network architectures pretty fast and evolve their legacy networks - (basically voice networks) - into data networks, evolving to technology architectures that offer agility, overall better end customer experience, better operational control and last but not least ensure lowest possible cost of production.
Software defined networking (SDN), network function virtualization (NFV), self-organizing network (SON), orchestration and cloud-based solutions are some the technologies that must for the foundation of this next generation technology architecture.
Software Defined Networking (SDN)
A much talked about technology in recent times, SDN is now apparently becoming a requisite for the enterprise world.Â According to an IDC report: "The worldwide SDN market for the enterprise and cloud service provider segments will grow from $960 million in 2014 to over $8 billion by 2018, representing a robust CAGR of 89.4%. This forecast for the SDN ecosystem includes in-use physical network infrastructure, controller and network-virtualization software, SDN network and security services and related applications, and SDN-related professional services."
This makes SDN one of the hottest enterprise technologies for at least the next three years. And technology providers, predominantly, networking companies and service providers sense a world of opportunities in this domain. That’s probably why technology providers are introducing new initiatives to gain a significant market share in the SDN segment. SDN players are also coming out with innovative ways to ease the adoption.
Companies for example Cisco are witnessing strong growth in SDN, with their application-centric infrastructure. It has more than doubled the customer base for APIC and ACI controllers that enable automation and programmability of the network. Cisco is witnessing rapid growth in its customer base in SDN, and this is a trend that's expected to continue going forward.
Network Function Virtualization (NFV)
NFV can potentially take any network function normally residing in purpose-built hardware and abstract it from that hardware. Once abstracted, the function can be managed as a software module that is deployed on a standard computing platform. It can also be moved to or replicated on another hardware or computing platform.
NFV helps you move away from multiple isolated networks, custom-built equipment, and complex operations. Instead, you work with an open ecosystem and an orchestrated set of virtualized network functions (VNFs). On achieving these benefits, you can further expand your business by exploring new
NFV virtualizes network services via IT technologies and Cloud Computing software to enable operators to:
- Reduce CapEx: reducing the need to purchase purpose-built hardware and supporting pay-as-you-grow models to eliminate wasteful overprovisioning
- Reduce OpEX: reducing space, power and cooling requirements of equipment and simplifying the rollout
- Accelerate Time-to-Market: reducing the time to deploy new networking services to support changing business requirements, seize new market opportunities and improve return on investment of new services. Also lowers the risks associated with rolling out new services, allowing providers to easily trial and evolve services to determine what best meets the needs of customers
- Deliver Agility and Flexibility: quickly scale up or down services to address changing demands; support innovation by enabling services to be delivered via software on any industry-standard server hardware
Clearly SDN and NFV help virtualize networks and maximize Opex/Capex. However a significant barrier to adoption and scale is legacy networks.Â Another challenge is centralized management. The other challenges are centered on sustaining profitable growth, redefining value, delivering customer experience, innovating, competing successfully. Given the above, it is important that service providers leverage specialist technology experts like Cisco to create financial models that are economical.
The good news is that user behavior is changing fast and changing for good. Economies are transitioning towards the Internet of Everything, which will need networks to transform and scale rapidly. As service providers remodel their businesses from voice-centric to data-centric, they will be able to reduce costs, improve efficiency and resource usage, while growing their business. They will also be able to create new revenue-generating service and show a superior financial performance compared to their peers in the market.
Clearly the telecommunications industry is at an inflexion point. Service providers that adopt technologies like NFV, SDN, will gain from the first mover advantage.